One Time Investment vs Syestamatic Transfer Plan: A Compartative Analaysis

Abstract

In today's dynamic market scenario, while one may aim to take advantage of favorable scenarios in both equity and debt markets, there is an inherent risk involved. Thus while a person take exposure to these respective asset classes it is important to adopt caution and do it smartly and prudently. When a person wants to invest a big lump sum amount in stock market. As markets are volatile and can go up or down very soon, there is always risk of loosing a big chunk of  their investment  Take a case where an individual want to invest `10 lacs in Equity mutual funds  and suddenly market crashes for next 2 months, In this case a big chunk of their investment will be lost, on the other hand if market moves up pretty fast, they can make a good profit. Here they have to decide their main focus. If it's minimizing risk and getting good decent returns in long-term, they should use something called Systematic Transfer Plan (STP). Systematic transfer Plan (STP) is a strategy where an investor transfers a fixed amount of money from one category of fund to another, usually from debt funds to equity funds.